Ottawa pro sports market favourable but fragile

Business success depends on to a large extent on team performance

OTTAWA, June 4, 2014 /CNW/ - The conditions for financial and competitive success of the professional sports franchises in the Ottawa-Gatineau market are more favourable than at any time in the past two decades.

But the Ottawa market is constrained in size and buying power compared to other major cities in Canada and the United States. Savvy management of playing talent and effective control of costs will be crucial to the long-term success of both the Ottawa Senators of the National Hockey League (NHL) and the new Ottawa RedBlacks of the Canadian Football League (CFL).

The Conference Board of Canada's newly published book, Power Play: The Business Economics of Pro Sports, describes the outlook for professional sports in Ottawa-Gatineau. Jeff Hunt, co-owner of the Ottawa RedBlacks, is the guest speaker at an Ottawa Economics Association Luncheon today at the Chateau Laurier.

"The Ottawa sports market is smaller than in many other Canadian cities" said Glen Hodgson, the Conference Board's Senior Vice-President and Chief Economist, who will discuss Power Play at the luncheon. "It has a smaller corporate sector and many fewer head offices than a city of comparable size like Calgary. This puts added pressure on team ownership and management to put a quality product on the rink or field."

HIGHLIGHTS

• Ottawa has the population size and disposable income to support multiple professional sports franchises successfully.
  
• Ottawa's model for re-building its combined outdoor and indoor stadium appears to strike the right balance between private investment and public support.
  

The Conference Board's analysis assesses conditions for successful franchises on three levels:

• market pillars: market size, income, corporate presence, and economic conditions (notably the exchange rate)
• league competitive conditions: including caps on player salaries, revenue sharing, and access to player talent
• franchise specific factors: ownership and management strength, playing facilities, and fan support

With almost 1.3 million people in the Ottawa-Gatineau region, the population is large enough to support both Senators and the RedBlacks, and disposable income per capita in 2012 was third only to Calgary and Edmonton. However, the small number of Canada's largest corporations headquartered (18 of 800 in 2012) does put more onus on ticket sales and less on corporate boxes and advertising.

While the loonie has slipped into the low 90-cent-range in recent months, it is much stronger than it was a decade ago, and it is still high enough to avoid weighing down Canadian franchises that pay players in U.S. dollars, as is the case in the NHL.

The respective leagues' competitive conditions are favourable to Ottawa's NHL and CFL franchises, largely because of caps on  player salaries. These conditions have been hard-won—the NHL went through a work stoppage in 2012-13, and the CFL is currently in the midst of negotiations with its players that could affect the start of the 2014 season.

Franchise-specific factors will likely have the most profound impact on the CFL RedBlacks. Ottawa should never have lost either of its previous CFL franchises -- the Rough Riders or the Renegades. As outlined in the book, many years of ineffective ownership and poor management decision-making contributed significantly to the folding of both franchises. To maintain enthusiasm, the RedBlacks will have to manage their player talent and business operations well to make on-field competitive success more likely.

An upgraded playing facility is also crucial, and Lansdowne Park is undergoing a fundamental renovation in preparation for the 2014 season. As has been done in Ottawa, making use of private-public partnerships (or PPPs) is one way to share the costs and risks of developing pro sports facilities, engage private sector project management practices, and thereby reduce the overall costs and risks to taxpayers.

Ottawa also has a new entry in the North American Soccer League, but could aim for even higher status in Major League Soccer (MLS). The population of Ottawa is anticipated to climb to more than 1.7 million by 2035. The combination of a larger and increasingly diverse population would provide the appropriate mix for an expansion of MLS to Ottawa within 20 years. A minor league baseball team in Ottawa is also a possibility.

Released in March, Power Play: The Business Economics of Pro Sports is authored by economists (and passionate sports fans) Glen Hodgson and Mario Lefebvre. It examines the economic conditions of the communities that host professional sports franchises, looks at the operating conditions for pro sports leagues, discusses franchise ownership and management, and addresses the politically hot topic of who should pay for new pro sports facilities. It is available in printed and e-book formats.

Join a live webinar by Glen Hodgson and Mario Lefebvre June 18, 2014 at 12:30 p.m.  EDT.

For more information, visit http://www.conferenceboard.ca/powerplay.

SOURCE: Conference Board of Canada

For further information:

Brent Dowdall, Media Relations, Tel.: [phone] ext. 448
E-mail: [email protected]